There’s nothing like punching that time clock for the last time as you picture your imminent golden years—full speed ahead to sun, golf and travel.
The first few years of retirement are usually when people start thinking about downsizing and/or relocating. But in your zeal to “live the dream,” you might overlook a number of common factors that can turn your real estate purchase into a nightmare. Here are six elements you should take into account before making that retirement, real estate decision.
Your House “Cost” Is More than Your Mortgage
Often, some of the most desirable areas for retirees have the highest associated costs. Additional costs could be things like property taxes, maintenance fees or homeowners association dues. After all, someone needs to pay for that tennis court or golf course…and you better believe it’s the homeowners.
Even if you’re downsizing to a condo, it can come with hefty fees for the grounds and common spaces. And while this is an issue for any homeowner, it can seem far more perilous when you are a retiree on a fixed income.
The fix: Do your financial due diligence and find out about local taxes if you are planning to relocate. And take a look not only at any fees associated with your property, but if there are limits to how far they can rise. In Arizona (a popular retirement destination), by law homeowners associations (HOAs) cannot increase dues more than 20% annually without a member vote.
But, consider that 20% can be a lot – and that you might be in the minority of homeowners who don’t want to finance a resort-like swimming pool.
Your Favorite Vacation Spot Might not have the Best Living Conditions
Many vacationers forget that often what they love about a certain destination is that they are on vacation. You are liable to care far less that there’s traffic or that service is slow or that restaurants are expensive. After all…you’re on vacation. But all those minor annoyances can become huge disruptors if you are trying to live in a place clogged with tourists. Or you might find that the place virtually shuts down in the off-season, leaving you with few options for entertainment or dining.
The fix: Visit your potential new location for an extended period. You could even stay in a long-term rental to see what it’s like to be a resident rather than a hotel guest. Even once you decide on your destination, renting for a while can be a smart choice.
Your Need for Amenities Might Change
Right now, you likely visit the doctor once a year, drive to the store to get your groceries and have a vibrant social life based on your work buddies. But all that can change as your needs change – and you might find yourself reliant on public transportation because you can no longer drive, or needing to see healthcare specialists more often than you would like.
The fix: Talk to current retirees about the services they use that might not occur to you and make sure that your intended location offers them. Determine if you want things like a top-notch healthcare system, nearby amenities and activities or favorable weather and look for an area that has those things.
Your Ability to Navigate Your Home Might Change, Too
More than 90% of people wish to age in place, finds the AARP. This means the vast majority of people 65 and older want to live in their own home and area during retirement. The ability to do this depends on the conditions of your home.
After all, if you have a steep driveway or an upstairs bedroom, it might be harder to navigate the inclines as you get older. And as much as you like to garden now, those rose bushes might become a thorn in your side when you have less energy to devote to active gardening.
The fix: Look into the principals of “universal design” and consider such factors as a main-floor master, wider doorways and step-free entrances. Think ahead to how much gardening and home maintenance you are going to want to do going forward – less might be more in terms of space.
Resale Value Matters
Your kids are grown so who cares about the school system? Well, turns out the next owner might. Same with any sort of outdated features like a chopped-up floor plan or huge built-in media cabinets.
The fix: A good school system and an up-and-coming area are always “must haves” when purchasing real estate…even if you personally don’t care. And before you buy a home that has an eyesore or odd element that can’t be updated with a cosmetic fix, think twice about whether it might turn off the next potential owner.
It’s Not Always Better to Purchase the Home Outright
Most retirees assume they want to avoid a mortgage, so they pay cash for a house. However, what that does is take liquid assets and make them “illiquid” because they are tied up in the house. It may be smarter to have a small mortgage with a low interest rate and have the rest of your assets available to invest for a potentially higher return.
The fix: Talk with a mortgage advisor as well as a financial planner about your options. Sometimes having a mortgage is the right choice for both cash flow and tax purposes, but everyone’s situation is different so these discussions should always take place with professionals who understand your unique situation.
The bottom line? Remember that you’re not just buying for today, but a good, long string of tomorrows, and you want to make sure your house is there to support you in the inevitable changes we all face.
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